We note that Avanir was in the news recently for its collaboration with Merck & Co., Inc. (MRK) for the co-promotion of Merck’s type II diabetes drug, Januvia and the sitagliptin family of products in the U.S.

As per the deal, Avanir is entitled to receive fixed as well as incentive-based payments. Avanir will promote the sitagliptin family of products in long-term care institutions from Oct 2013. Merck will also promote these products in all other settings. Merck is also responsible for all other aspects such as research, manufacturing and marketing of these products.

The deal is a major positive for Avanir. The collaboration provides Avanir with funds in the form of fixed as well as incentive payments. This deal not only brings Merck’s leadership in diabetes but also Avanir’s well established sales force in the institutional setting.

Avanir currently carries a Zacks Rank #3 (Hold). Right now, Jazz Pharmaceuticals Public Limited Company (JAZZ) and Shire (SHPG) look well positioned, each with a Zacks Rank #2 (Buy).